Category Archives: Best Stocks To Invest For 2016

NVIDIA Increases Investment by $4 Billion in Optical Communications with Lumentum and Coherent, Driving Stock Surge

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On March 2, U.S. stocks in the optical communication sector rose against the market trend. NVIDIA announced strategic multi-year partnerships with two leading companies in the optical communications field, Lumentum and Coherent, investing $2 billion in each, for a total of $4 billion. This investment will focus on the research and development of advanced optical technologies and manufacturing, accelerating the large-scale development of the next-generation AI infrastructure. It further strengthens NVIDIA’s global leadership in AI and accelerated computing.

The partnerships are non-exclusive agreements, each including billions of dollars in product procurement commitments, as well as capacity usage and priority rights for future advanced lasers, optical networks, products, and components.

NVIDIA’s investment will primarily support the research and development work of Lumentum and Coherent, future capacity expansion, and daily operations, while also helping the companies increase their U.S. domestic manufacturing capabilities. Lumentum will build a new wafer fab, and Coherent will expand its domestic manufacturing presence.

Optical interconnect technology and advanced packaging integration are the key foundations for continuously expanding AI computing factories and achieving ultra-high bandwidth and energy-efficient interconnectivity. These are critical components of the next-generation AI infrastructure. Through this cooperation, NVIDIA aims to leverage its technological and market advantages in AI, accelerated computing, and networking, while combining Lumentum’s strengths in optical and photonics technology and Coherent’s expertise in optical innovation and advanced manufacturing. The goal is to push breakthroughs in cutting-edge fields such as silicon photonics technology and support both partners in increasing their capacity and research investments to meet the construction needs of global next-generation AI data centers.

Jensen Huang, founder and CEO of NVIDIA, stated, “Artificial intelligence is reshaping computing models and driving the largest-scale infrastructure buildout in history. This partnership with two leading companies will help NVIDIA develop more advanced silicon photonics technology and accelerate AI infrastructure breakthroughs in scale, speed, and energy efficiency to create gigawatt-level next-generation AI computing factories.”

Jim Anderson, CEO of Coherent, commented, “This strategic partnership reaffirms Coherent’s critical role as a core enabler of next-generation artificial intelligence data center infrastructure. We are honored to deepen this 20-year-long partnership with NVIDIA, providing support for a wide range of products to help them build future AI data centers.”

Michael Helston, CEO of Lumentum, said, “This multi-year strategic agreement demonstrates our mutual commitment to advancing optical technology innovations that will become the driving force of next-generation AI infrastructure. To support this collaboration, we will invest in building a new manufacturing plant to increase capacity and accelerate technological innovation. We look forward to working with NVIDIA to continuously break through technical boundaries and unlock more possibilities for future AI optical architectures.”

Lumentum is a global leader in optical and photonics technology, providing core support for AI and cloud computing network infrastructure. It is headquartered in San Jose, California. Coherent, founded in 1971, is a leader in photonics, with operations in over 20 countries, providing world-leading photonics technology for data centers and communications.

UBS Strategists Downgrade U.S. Stock Outlook: Weakening Dollar, High Valuations, and Washington Turmoil

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UBS’s Chief Equity Strategist has lowered its outlook for U.S. stocks, citing risks related to a weakening dollar, overvalued stock markets, and increasing uncertainty due to policy turmoil in Washington.

Andrew Garthwaite, the Global Head of Equity Strategy at UBS, downgraded the rating of U.S. stocks in global equity portfolios to “Benchmark.” He believes that the factors that have driven U.S. stocks to outperform global markets in recent years are gradually fading.

Garthwaite points out that the risk associated with the dollar is the core concern. According to UBS’s forecast, the euro-to-dollar exchange rate will rise to 1.22 by the end of the first quarter and the dollar is facing “structural, asymmetric downside risks.”

Historical data shows that when the trade-weighted dollar index drops by 10%, U.S. stocks, on average, underperform global equities by about 4% if not hedged. This year, with the dollar weakening and foreign markets offering cheaper valuations, funds have been flowing out of the U.S., leading non-U.S. equities to significantly outperform.

So far this year, the MSCI World Index (excluding the U.S.) has risen about 8%, the Nikkei 225 Index has surged 17%, and the Stoxx Europe 600 Index has gained 7%. Meanwhile, the S&P 500 Index has remained flat, highlighting the clear rotation of funds away from U.S. stocks.

At the same time, investor concerns about the potential risks of the artificial intelligence investment boom, along with continued inflationary pressure in the U.S., have put further pressure on U.S. stocks.

UBS also pointed out that one of the key factors supporting U.S. stocks—share buybacks—is losing its strength. Currently, the buyback yield in the U.S. is roughly in line with global peers, weakening its support for earnings per share growth and capital inflows.

The bank stated that the combined “shareholder return yield” of dividends and buybacks in the U.S. is now only about half of Europe’s. Garthwaite wrote: “Buyback yields are no longer exceptional. They were once an important driver of fund flows, EPS growth, and market capitalization growth.”

Valuations being too high have exacerbated this unease. UBS calculates that the price-to-earnings ratio of U.S. stocks, adjusted by sector, is 35% higher than that of international peers, while the average premium since 2010 was only about 4%. Approximately 60% of industries are not only valued higher than global benchmarks, but also above their own historical premium levels.

UBS also noted that policy volatility under the Trump administration poses additional headwinds. This year alone, the U.S. has seen frequent changes in policies related to tariffs, credit card interest rate caps, restrictions on private equity investments in the housing market, reevaluation of drug pricing, and proposed limits on defense sector dividends and buybacks.

However, the strategist is not entirely bearish. Garthwaite emphasized that when markets are in the early stages of a potential bubble, the U.S. economy and stock market often benefit more than other markets.

Furthermore, UBS expects the advancement of artificial intelligence applications in the U.S. to outpace most other major regions, supporting earnings growth in key industries. UBS strategist Sean Simonds set a year-end target of 7500 points for the S&P 500 Index.